Fannie Mae recently released its Selling Guide Announcement SEL-2023-02 with significant updates for appraisers. This announcement addressed the changes to valuation modernization, Fannie said in a release.

The following items are of primary interest to appraisers:

• Value acceptance is being used in conjunction with the term “appraisal waiver” to better reflect the actual process of using data and technology to accept the lender-provided value. It is moving away from implying that an appraisal is a default requirement. Fannie Mae noted it is using “value acceptance (appraisal waiver)” for a period of time and will eventually move to “value acceptance” after the market absorbs this change.
• Value acceptance + property data is a new option that utilizes property data collection by a third party who conducts interior and exterior data collection on the subject property. To ensure consumer protections, the lender must verify and be able to demonstrate that data collectors are vetted through an annual background check, professionally trained, and they possess the essential knowledge to competently perform the property data collection.
• The property data collection is used by the lender to confirm property eligibility, and an appraisal is not required. This option also requires submission of the data to Fannie Mae’s Property Data API based on a new data standard and delivery of Special Feature Code 774.
• Hybrid appraisals are based on interior and exterior property data collection by a vetted and trained third-party that is provided to an appraiser to inform the appraisal. They are permitted for certain one-unit transactions where value acceptance + property data was initially started, but changes in loan characteristics result in the transaction not being eligible for that option.
• A new policy allows alternative methods to the Appraisal Update and/or Completion Report (Form 1004D). These include a borrower/builder attestation letter to verify completion of construction, and a borrower attestation letter to confirm completion of repairs for existing construction in lieu of Form 1004D. The policy further describes required exhibits and controls. These completion alternatives are necessary for lenders to confirm completion of repairs or alterations with the value acceptance + property data option because Form 1004D cannot be used when there is no appraisal. This change also allows appraisers to use virtual inspection technology to supplement the 1004D process with certain constraints.

“The appraisal profession is fully prepared to deliver a range of valuation services to the mortgage market, as the Appraisal Institute (AI) has been offering education on desktop and hybrid appraisals for many years,” AI President Craig Steinley told Valuation Review in an emailed statement. “This announcement does raise concerns and questions about increasing collateral risk at a time of market volatility. Further, the change complicates appraiser recruitment and diversity efforts through the insertion of an unregulated contingent of property data collectors into the mortgage lending process.”